TV sports rights crisis brings boom-to-bust woe to soccer

Paying too much for sports rights has brought about a crisis in the TV business that's already damaged a major media empire, Kirch. Now it threatens the world's oldest soccer league, the English Football League, and the repercussions may be felt in sports around the globe.

As many as 30 soccer clubs, some more than 100 years old, may go bankrupt if Carlton and Granada Television, the major independent British commercial networks, make good on their threat to close down their jointly owned ITV Digital network. They placed ITV Digital in receivership last week. Two years ago, ITV Digital beat off fierce competition from Rupert Murdoch's BSkyB to win broadcast rights for what is now the Nationwide Football League (named after its financial-services-company sponsor). ITV Digital signed a four-year, $450 million deal, of which $260 million remains to be paid.

Like Germany's Kirch, ITV Digital has few subscribers (1.2 million) and scant prospect of a significant increase. Neither subscription nor ad revenue can sustain the investment. Recession means the existing analog TV service can no longer support the losses.

The heart of the matter is the relationship between league and broadcaster, and the regulatory framework within which they operate. There is enough money in English soccer to keep all 92 professional-league teams alive. The problem is the Nationwide has been a poor second in terms of quality and revenue generation since 1992, when 20 elite clubs, including Manchester United, broke away to form the wealthy Premier League (currently on a three-year, $1.5 billion Sky deal). The Nationwide's clubs no longer share a giant pot of TV money with the elite but must make do with a smaller pot of their own. Nevertheless, Nationwide clubs have built business plans dependent on that pot.

Sky has done a wonderful job of repackaging soccer in the U.K. but it is still normal to have a paltry 1 million viewers for any given Sky live TV game. Murdoch has a great interest in seeing ITV Digital fail (that is, merge with him) given his huge investment in Sky. That's why he has denied ITV Digital access to the Sky Digital platform. Never mind the poor viewer who has to subscribe to both. The two rivals do agree that the U.K. government's continued dithering about setting a launch date for the enforced transfer of the whole TV system to digital from analog gives consumers little incentive to adopt the new technology. That may be so, but the switchover date is a political hot potato. No politician wants to be crucified in the tabloids for depriving senior citizens of their TV. For now, digital TV remains a technology in search of an audience.

Fans, desperate to save clubs that are part of the lifeblood of British communities, have made the sensible proposal that Sky be forced to take ITV Digital for a fee. But the U.K. government and Murdoch (a major Tony Blair supporter) have so far shown no interest.

Whatever the outcome, lawsuits will fly and real soccer fans will pay lawyers' fees. However, those fans are tired of being abused and they are voting with their wallets. It's an unwelcome shock to a sport that has long taken them for granted.

Stefano Hatfield is editorial director of Ad Age Global and Creativity.